To avoid trade restrictions, a U.S. firm moves its final production process to Ireland and then ships the final products to Germany. This is an example of
A) trade deflection.
B) trade diversion.
C) protectionism.
D) rules of origin.

Question

Quizplus · Accepted Answer

This scenario is an example of trade deflection, as the U.S. firm has moved its final production process to Ireland in order to circumvent trade restrictions and still access the German market. Trade diversion refers to the redirection of trade from a more efficient producer to a less efficient one due to trade agreements or policies. Protectionism refers to government policies that protect domestic industries from foreign competition. Rules of origin refer to the criteria used to determine the country of origin of a product for purposes of trade agreements or policies.

To Avoid Trade Restrictions, a U